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Europe agrees to change the rules of the game to platforms like Amazon and Google

02/19/2019
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News
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Privacy, IT & Digital Business

Isabel Martínez Moriel analyzes in El Confidencial the agreement adopted by the European Institutions to advance in the Digital Single Market.

Yesterday afternoon, the European Parliament, the Council and the European Commission reached a political agreement which is the step prior to the formal adoption of the "EU Regulation on the promotion of fairness and transparency for companies using on-line intermediation services". The new regulation, whose formal adoption is expected in the coming weeks, will mean a paradigm shift in the rules that have so far applied online platforms or "marketplaces" such as Amazon, and search engines such as Google, facilitating greater transparency and competitiveness in P2B relations.

Today, the online market is not just another sales channel; in certain sectors, it has become the "channel" to compete in the market. According to data from the European Commission itself, 60% of private consumption and 30% of public consumption of goods and services are managed through online platforms and browsers. These online intermediaries gain their market power not only through the quality of their search engine or the offer of their platform, but also through all the data they obtain from the interaction of end users with the features and products offered by merchants. Therefore the European Commission has come to call platforms and browsers "gatekeepers" of markets and consumers, highlighting the asymmetry between the relative market strength of a few platforms and the fragmentation of thousands of small businesses.

Undoubtedly, recent cases such as Google Shopping and the ongoing investigation of Amazon by the Directorate General for Competition, have revealed the most damaging effects of certain commercial practices when carried out by dominant operators. But what happens when these harmful practices, which are unilateral, are carried out by a platform that has not yet acquired relevant market power? Well, antitrust law does not address these possible conflicts between companies, as they would not be cases of abuse of dominant position, and unfair competition law applies to very specific cases that may not occur or be proven in the relations between online intermediaries and merchants.

Among the commercial practices potentially harmful to companies offering products and services through platforms stand out: the lack of transparency in the classification of products or services offered, the prevalence of own goods and services in searches without a clear warning of advertising motivation, the absence of clear rules regulating the de-listing of products or cancellation of accounts, the sudden and unreasonable changes of terms and conditions applied to traders and the requirement of contractual clauses called "most-favoured nation" which consist in limiting the ability of companies to offer more attractive conditions through different channels or platforms. On the other hand, the ranking of search engine websites has a significant impact on customers' purchasing decisions and, therefore, on companies' sales results.

What happens when these harmful practices, which are unilateral, are carried out by a platform that has not yet acquired relevant market power?

From the entry into force of the new Regulation, search engines and platforms must provide clear and concise information on the main parameters used to determine the classification and order of appearance of the products and services offered, explaining how they treat their own products and services and how they position them in the ranking. Likewise, the platforms must establish in writing the terms and conditions applicable to the bidding companies, and any modification of the same will require at least 15 days notice.

The cancellation of an account or the discontinuation of products must respond to clear and coherent policies, respecting a 30-day notice period in case of termination of your relationship with the platform. Online platforms should implement internal complaint management mechanisms (except for small business platforms) with respect to buyer disputes or claims, and the damages that may result from the lack of proper returns and customer service management.

In addition, the new Regulation requires platforms to develop and publish general policies on what data is generated on their platform, who can access it and under what conditions. Finally, it provides for the possibility of compensating traders for harmful practices, encouraging mediation and enabling the active legitimisation of public bodies, organisations and associations representing traders to bring legal actions against platforms and search engines.

The European Union is aware of the need for a flexible regulatory framework capable of bringing together the different interests at stake in such a way that no operator or consumer is excluded from the developments that the digital single market can generate. Therefore, the commitment adopted extends to the creation of an Observatory on the Economy of Electronic Platforms, which will have to report on the impact of the measures and possible improvements. The Regulation will be directly applicable in all Member States once 12 months have elapsed since its formal adoption and publication and may be subject to review 18 months after its application.

Once again, Europe's competitiveness is at stake in the global market, maintaining a difficult balance between efficiency, innovation, the creation of opportunities for entrepreneurs and the wellbeing of citizens, in contrast to other international markets focused exclusively on digitisation. As Europeans we must see this as an advantage and a model that we must protect.